Reviews of Economic Development
Literature and Practice: No. 16
Public-Private Partnerships
and State and Local Economic
Development:
Leveraging Private Investment
Stephen P. Mullin
Econsult Corporation
2002
U.S. Economic Development Administration
Public-Private Partnerships and State and Local
Economic Development
Leveraging Private Investment
Stephen P. Mullin
Econsult Corporation
3600 Market Street, 6th Floor
Philadelphia, PA 19104
www.econsult.com
mullin@econsult.com
August 2002
EDA Award No: 99-07-13818
This publication was prepared by Econsult Corporation. The statements, findings,
conclusions, and recommendations are those of the author and do not necessarily
reflect the policies or views of the Economic Development Administration.
CONTENTS
ACKNOWLEDGEMENTS………………………………………………………………..….. iv
EXECUTIVE SUMMARY………………………………………………………………..…... v
1. INTRODUCTION………………………………………………………………………..…. 1
2. CLASSIFICATIONS AND FRAMEWORK FOR REVIEW……………………………. 4
Basic Definitions……………………………………………………………………………. 4
Public-Private Possibilities: A Classification……………………………………………….. 5
Economic Development and Public-Private Partnerships: An Overview…………………... 7
What this Review is NOT…………………………………………………………………... 9
3. PUBLIC-PRIVATE PARTNERSHIPS AND ECONOMIC DEVELOPMENT:
LITERATURE AND PRACTICE REVIEW……………………………………………... 10
Definitions and Rationale………………………………………………………………….... 10
Recent History………………………………………………………………………………. 12
Key Issues and Findings…………………………………………………………………….. 14
Governance………………………………………………………………………………. 14
Partnership Roles, Structuring, and Negotiations…...…………………………………… 16
Role of Public Real Estate: Development Projects………………………………………. 18
Accountability and Monitoring…………………………………………………………... 19
Measurement and Performance Evaluation…………………………………………………. 20
4. IMPLICATIONS FOR ECONOMIC DEVELOPMENT PRACTICIONERS………….24
General Implications………………………………………………………………………... 24
Implications Peculiar to Development Projects…………………………………………….. 25
Implications Peculiar to Ongoing ED Functions……………………………………………. 25
5. APPENDICES……………………………………………………………………………..... 27
Categories of Economic Activity: A Classification………………………………………… 27
PPP Sources…………………………………………………………………………………. 28
ENDNOTES……………………………………………………………………………………. 31
REFERENCES……………………………………………………………………………...…. 35
iii
ACKNOWLEDGMENTS
The author wishes to thank the Economic Development Administration and the Delaware Valley
Real Estate Investment Fund for providing support for the development of this report, as well as
acknowledge the excellent research assistance of Stephanie Meyer. Kay Fronk of EDA has been
helpful throughout the process. Helpful comments from my colleagues at Econsult, as well as
insights gleaned from ongoing discussions with John Stainback, are much appreciated. EDA
reviewer John Fieser provided useful comments.
iv
EXECUTIVE SUMMARY
Public-private partnership (hereinafter referred to as “PPP” or “PPPs”) is now a standard concept
in business and state and local government circles, especially in the economic development
realm. Some regard PPPs as “the” answer to many economic growth and development problems
facing state and local governments today, while others express varying degrees of skepticism
about their attractiveness and effectiveness. Nonetheless, most seem to agree that PPPs will
likely remain an important approach to designing and implementing economic development
strategies.
PPPs take many different forms for many different purposes. This report is intended to provide
economic development practitioners an overview of key findings from the large and varied
literature and practice on the use and effectiveness of PPPs as applied to two particular types of
economic development efforts: those ongoing activities aimed at improving the “business
climate” and marketing of a jurisdiction and those formed to promote and carry to fruition
specific private real estate development projects.
We first review the definitions and purposes of PPPs. A common thread in the literature is that
PPPs can best be considered approaches or methods rather than ends or objectives in and of
themselves, and they are characterized by some type of formal partnership arrangements that
delineate partners’ roles and responsibilities, risk-sharing, and distribution of financial and
nonfinancial benefits. These are important considerations because the fundamental purpose of
partnering is to take advantage of the potential for all parties to gain greater benefit than they
could on their own. To frame the analysis, we develop an economic theory-based classification
for categorizing the many different types of PPPs. Using this framework, we briefly examine the
field of state and local economic development, and the ways in which PPPs have been utilized
for different types of economic development programs and efforts, especially those dealing with
revitalizing cities and urban areas.
We identify and briefly discuss several key issues associated with the use of PPPs in these two
specific areas of economic development practice. These include governance issues, partner
selection, deal structuring and negotiations, the role of publicly owned real estate, government
impediments to expanded use, and accountability and monitoring issues. Our purpose is to
highlight these issues and offer some guidance to practitioners engaged in or planning to utilize
PPPs for economic development purposes.
We then examine how the literature has addressed a very key question: Are PPPs successful?
First, it is difficult to disentangle success of PPPs from success of economic development efforts
in general. As economic development practitioners well know, there is a growing debate about
the appropriateness (as well as the success) of economic development efforts in general, and this
spills over into evaluation of economic development PPP efforts. For example, was a policy,
program, or project unsuccessful because it was wrong in concept, or because its implementation
was hampered by a PPP approach?
v
As such, it may be better to restate the question: “Are PPPs effective approaches to particular
economic development efforts?” Even that is hard to determine since the literature lacks specific
definitions and measures and, for the most part, sufficient data with which to evaluate success.
Conceptually, we might think of considering a PPP “successful” if it (a) increases the probability
of a good economic development effort being successful and/or (b) it increases the net benefits to
one or more of the partners, without decreasing that of any partner. While this still leads to
practical measurement and evaluation limitations, we can generalize some findings about the
effectiveness of PPPs in economic development. There does seem to be some evidence that PPP
approaches can generate efficiency gains for the jurisdictions involved, if for no other reason
than they can leverage or combine private-sector capital and talent to direct investment and the
location of economic activity. While much of the advocacy literature and practice argues the
PPPs are fair and responsible partnerships, some of the more academic literature suggests that
the public-sector partners may often bear greater risks and costs relative to the distribution of
partnership benefits. Confounding the entire discussion, however, is the difficulty in identifying
and valuing the costs and benefits (which require normative value judgments), so there is room
for honest disagreement and continuing analysis and debate. Related to this is the fact, that since
no two jurisdictions are identical, there is no uniform definition of success. What may seem
excessive public participation or risk-assumption in one jurisdiction (and hence an
“unsuccessful” PPP) may be very appropriate in another.
Despite the lack of universally accepted or conclusive evidence on effectiveness, in efficiency
and equity terms, it does appear obvious that PPPs will continue to grow in importance as
approaches or specific tools for conducting various types of state and local economic
development programs. They are politically popular, and they are generally viewed positively by
the business community as a method for contributing talent and capital, as well as assuring their
input into important economic development decisions. In addition, several common
characteristics appear to be associated with “successful” PPPs:
•
•
•
•
•
Receptive and supportive public sector to a partnership approach
Clear objective(s), with well-defined, limited, and measurable objectives
Clearly delineated (via fair negotiation) roles, responsibilities, and shared risks
Active and meaningful participation of all partners
Satisfactory accountability and openness with the public
Are PPPs the answer to all of life’s problems? Peters (1998) concludes his study: “Partnerships
are an important instrument for government intervention into society. They are neither the
answer to all problems of public policy, nor are they a totally symbolic and ineffective mode of
action.” Our review of the literature and practice leads to a similar conclusion, and we suggest
that (1) PPPs can be appropriate as viable, alternative approaches to certain types of state and
local economic development efforts and (2) the public-sector officials (especially) should
continue to search for new partnership opportunities, while paying careful attention to
fundamental partnership issues: purpose, structure, governance, roles, risk-sharing, monitoring,
evaluation, and distribution of benefits.
vi
1. INTRODUCTION
Public-private partnership (hereinafter referred to as “PPP” or “PPPs”) is now a standard concept
in business and state and local government circles, especially in the economic development
realm. Some regard PPPs as “the” answer to many economic growth and development problems
facing state and local governments today, while others express some degree of skepticism about
their “cure-all” capabilities and properties. Nonetheless, most seem to agree that PPPs will likely
remain an important approach to designing and implementing economic development strategies.
This report is intended to provide economic development practitioners an overview and a
summarization of key findings from the large and varied literature and practice on the use and
effectiveness of PPPs as part of two particular types of economic development efforts: those
concentrating on improving the “business climate” of a jurisdiction on an ongoing basis and
those formed to promote or encourage specific private real estate development.
While PPPs are not new to the state and local government economic development scene,
professional and academic interest in their use and effectiveness as economic development tools
appears to have increased in the past two decades.1 Over that time period, we may roughly
identify two distinct categories, periods or themes concerning the significant interest in the use of
PPPs. First, one period of intense examination of PPPs coincided with the urban crises and
macroeconomic problems of the 1970s and the onslaught of the new fiscal federalism, or
“devolution,” set in motion by the Reagan administration in the early 1980s (along with a deep
recession). A second wave of PPP interest and analysis followed the real estate and stock market
collapses of the late 1980s and the ensuing national recession of the early 1990s. Once again,
cities and states (especially older and slower growing) found themselves in dire fiscal straights
and searched anew for approaches to maintaining and expanding economic investment and
activity within their borders. This wave essentially continues today, tempered by a recently
concluded, long economic expansion that did not always translate directly into significant state
and local government tax and revenue increases.
Like “sprawl” and “entrepreneurship,” the term PPP has entered the public-sector economic
development lexicon and generally connotes a positive and innovative approach to strengthening
the local economy. However, again like those terms, the definition of PPP is not standard and
clear. This is likely due to the many different purposes and objectives of PPPs, the many forms
such partnerships can take, and the many ways risks, costs, and benefits can be apportioned in
ways not well understood by many practitioners. Further, the current wave of interest includes
analyses that can now take into account some historical empirical evidence of PPP performance,
and study more deeply the nature of PPPs themselves.
Information about such partnerships is very commonly transmitted via case studies or media
accounts, and they may often focus on the idiosyncratic nature of the particular case. More
detailed research into the nature and effectiveness of this form of economic development activity
exists, although it appears to be somewhat limited. Econsult has reviewed the literature and
practice on PPPs in the United States and Canada in various academic and trade journals, books,
1
websites, compendiums of articles, published case studies, and proceedings of seminars and
forum discussions on the topic.2,3 There is immense literature on PPPs in general and focusing on
economic development applications in particular.4 Several excellent sources provided good
overviews and syntheses of research and analysis work on particular PPP components, and we
avoided “reinventing the wheel” by re-reviewing many of those original sources.
As requested by EDA, this review is geared primarily for economic development practitioners
rather than academics.5 Given the enormity of the literature, the review is not meant to be
exhaustive, but rather illustrative of the types of studies and references of key issues involved in
PPP approaches and applications. Further, our intention is to synthesize some of the key findings
in a fashion helpful to economic development practitioners. The purpose is to assemble the
information in an easy-to-understand format to help practitioners sort out the information and to
have a relatively handy and useful reference for them. Our focus is also on the more recent
literature, and we have paid careful attention to reviews and studies that incorporate earlier and
more detailed studies. We have not attempted to cover old ground with regard to our survey of
the literature, and, as such, we occasionally utilize indirect references. The bibliography includes
specific references we have reviewed, as well as sources assembled by different groups to assist
practitioners in identifying particular references (though not directly cited in the study).
Also, this review is not meant to serve as a step-by-step, or “how-to” primer on setting up PPPs.
Three sources, however, are very comprehensive and readable in this regard, and are detailed in
Section 2. They are strongly recommended to economic development practitioners interested in
establishing PPPs.
Organizing such a broad array of sources (including studies, reports, books, websites, and
articles) is a necessary primary task. Econsult has developed what we believe to be a useful
framework for categorizing various PPP issues, debates, and trends, as well as different types of
public processes and subsidy methods. This report is structured around that classification, which
is detailed in Section 2.6
Section 3 presents the core of the findings from the literature review. Following a sampling of
PPP definitions and brief outline of the history of PPPs, we turn to an examination of key issues
raised in the literature and then to the evaluation of PPP performance. An interesting key
question is: Why do PPPs form? One common business view is that the impetus comes from the
private side, where business leaders band together out of civic concern to help the city or publicsector jurisdiction. While this may be an important characteristic of PPPs, it seems to hype the
role of private-sector altruism and discount the role of the private sector in recognizing the
potential gain from such partnerships. Gifford (1986) noted that
Experience with many public-private partnerships suggests that they generally involve measures
of altruism and self-interest. To deny that both factors are at work seems, on the one hand, unduly
cynical, and on the other, unusually naïve.
We note that much of the literature focuses on economic development PPPs in urban settings,
rather than suburban or rural or even regional settings, and often seems more about
2
redevelopment than new economic development. (Haider, 1986). This seems to reflect a
preponderance of PPP approaches in urban settings, but they are by no means limited to urban
centers (especially declining ones).
Section 4 summarizes certain implications for economic development practitioners, and Section
5 includes the two appendices: Categories of Economic Activity and PPP Sources.
3
2. CLASSIFICATIONS AND FRAMEWORK FOR REVIEW
Public-Private Partnerships, like many things, are defined in the eye of the beholder. Still, there
should be consistency and compatibility across and among the different viewpoints. Although
the framework developed here is based on economic theory, it is readily consistent with the
views of other disciplines, including the political science, legal, financial, professional economic
development, and sociological perspectives.
There are many different types and applications of PPPs, and just as many ways to categorize
them. Linder (1999) carefully examines various meanings of the term. Pierre (1998) suggests
three mutually exclusive “general themes” or “analytical contexts” in which PPPs can be viewed
and analyzed: First, they represent “institutionalized cooperation” between the public and private
sectors, and we can examine how they evolve and mature in a “socio-political context.” Second,
they can be viewed as a(n economic development) policy instrument or an arrow in state and
local economic development officials’ quivers. Third, they can be assessed as an alternative form
of urban politic structure and public resource allocation mechanism, during a time when many
are observing a change in the traditional role of government, shifting from “rowing to steering”
(Osborne and Gaebler, 1992). These are all interesting viewpoints, and all lead to important
questions and issues.
Another way to organize the various types of PPP applications is to borrow from standard
economic textbook definitions, distinguish among several types of economic activity, and
examine how partnerships are applied across those types. This approach to categorization, which
is consistent with each of the three viewpoints offered by Pierre, forms the initial framework for
our review of the literature. We first look at basic definitions, then how they can apply to all
types of public-private cooperative activities, and then specifically to economic development
efforts.7
Basic Definitions
The typical economic measures of the performance of an economic system are efficiency and
equity. We study the allocation of resources and the distribution of outputs resulting from
individual or decentralized economic decisions by consumers and producers in a free market
economy. We also note that in certain instances, the free market allocation mechanism (the
invisible hand) fails, and in such cases, there is a potential role for collective action, typically via
a government, for improving the misallocation of resources. Many people consider the public
and private sectors completely mutually exclusive realms, but that view is constantly being
revised. As noted above, PPPs are now recognized as viable and politically attractive
mechanisms for combining the advantages of both private and public sectors.
However, before venturing too far into this analysis, we may ask what exactly are meant by the
terms “public” and “private” and “partnership”? A synthesis from many sources suggests the
following general definitions:
4
•
By “public” we mean resources are allocated through some type of centralized and
collective decision-making process, typically, but not necessarily, via some level of
government. The public resource allocation decision can be broken into two
components:
•
collective or public choice, whereby the collective allocation decision is
made as to what to provide and how to pay for it (often this is via some
voting mechanism), and
•
public-sector provision of the good or service, which can be accomplished
through a variety of production arrangements, including self-production by
the public-sector jurisdiction itself.
•
By “private” we mean the economic decision maker is an individual consumer or
producer, maximizing utility or profits, respectively, resulting in resource allocation
decisions made in a decentralized fashion.
•
By “partnership” we mean a formal or informal arrangement, agreed upon by both
parties in advance, calling for some kind of joint action or collaboration to provide
(and possibly produce) a product or service; with joint decision making and all known
roles, responsibilities, compensation, and risks identified and allocated between and
among the partners by this advance agreement. This can be for a specific deal or
transaction or institutionalized for joint actions and collaboration on an ongoing basis.
Note that partnerships can be formed by private parties alone, or by public parties
alone. Our study focuses on partnerships with at least one public partner. This
definition alone suggests the primary economic reason for the establishment of a
partnership: both (or all) parties stand to gain from such arrangements, beyond the
potential gains from other decision-making or production arrangements.
Public-Private Possibilities: A Classification
Economists learn early that in a mixed economy, all economic activity entails some combination
of private (decentralized) and public (centralized/collective) action or influence. Purely public or
purely private markets never exist in practice, and even though the U.S. economy is the most
“private” in the world today, our public sector is huge. To analyze the interactions of private and
public sectors, it can be helpful to categorize economic activity (the allocation of resources and
the eventual distribution of outputs) in two broad, mutually exclusive approaches:
•
Current Consumption/Production vs. Investment (for future Consumption/
Production). This is often manifested in organizations creating operating and capital
budgets, with separate decision making and financing. Clearly the two are linked, as
services and funding for investments are made over time via operating budgets. The
underlying difference here is the time horizon and the economic tradeoffs involved in
the postponement of current consumption for future consumption. And, it is worth
5
noting that investment can be made in either physical (tangible) or human (intangible)
capital.
•
Private (decentralized) vs. public (centralized) decision making. As noted above,
decentralized, private market (invisible hand) decision making dominates the
marketplace in the United States and, to a lesser extent, Canadian economies.
Collective decision making, typically via governments, is an important component of
the marketplace, and is theoretically appropriate as a means of dealing with cases of
“market failure.”
Combining these two approaches produces four distinct categories of economic activity.8 We
have well-established theories about how each of these four sectors functions (the underlying
behavior of the actors and conditions for efficiency, etc.), and that, at least in theory, they can all
exist together and we can achieve “optimality” in terms of intertemporal resource allocation. We
also know that the borders between and among these categories are not uncrossable; in fact,
when and how these boundaries are crossed is the focus of intense study. Given this
classification of economic activity, PPPs obviously represent examples of “boundary crossings”
in every one of these categories, and, for each, it is of special interest to examine how and why
they are used and how effective they are in achieving the goals of the partners. Understanding
where a particular PPP approach “fits” in this framework can be extremely helpful in any review
or examination of PPPs.
While PPPs play important roles in all four of these categories of economic activity, this review
does not cover certain types. First, since the review concentrates on state and local economic
development activities, we exclude activities in the private-consumption category, as well as
most of the public-consumption category. The latter includes the private sector assisting public
efforts to provide for or promote the consumption of social services, or providing public services
via private contracting, as in the cases of contracting for custodial services for public buildings or
of privatizing prison facilities and services.9 We also largely exclude the public-investment
category, where PPPs may be involved in the investment in (or development of) “typically”
public infrastructure, including roads, public buildings, and public utilities.10
Finally, we also exclude private-production and private-investment activities utilizing standard
or customary public-sector economic development incentives, including but not limited to tax
abatements, subsidized loan programs, tax-advantaged zones, and employment or investment
based grant programs. The key distinction here is whether these programs are available to all (or
some groups of) businesses by right, and essentially can be considered part of the natural course
of doing business in any jurisdiction.11
This leaves “border crossing” areas pertinent to certain types of state and local economic
development activity undertaken by or on behalf of the public sector that represent common
applications of PPPs:
6
•
In the public-consumption category, we have economic development program
administration, marketing, operations, outreach, and direct business assistance,
including assessment of regional economic strengths and weakness, business
retention activities, and targeting industries for attraction.
•
In the private-investment category, we have private real estate or infrastructure
investment and development.12
•
In the public-investment category, we have human capital investment activities,
including job-training programs and work force development initiatives.
This report focuses primarily on the first two. The typical objective of the first activity is to
improve the business climate of the particular jurisdiction and to help market that information
and the jurisdiction as a good place to locate and invest. Throughout the remainder of this report,
we’ll refer to this category as “Ongoing ED Function.” The second category essentially
represents what are generally referred to as “economic development projects”: real estate or
other large-scale capital investment projects for which public-sector support is considered
because of perceived economic development benefits beyond the anticipated private financial
investment returns.13 We refer to this type of activity as a “Development Project.” 14
We have excluded from this review the human capital investment, or work force development,
category for several reasons. First, many of those efforts include social service components,
which add another dimension to the issue. Second, the private-sector participation typically takes
the form of subsidizing training and/or hiring the trainees. Third, work force development
programs typically are driven and funded by the federal government, in stark contrast to the state
and local nature of traditional economic development activities. Of course this does not mean
that this area is not an important component of economic development efforts. In fact, it is
arguable that incorporating human capital investment strategies and program into the overall
economic development efforts of state and local governments represented a great step forward
during the 1990s. A recent Upjohn Institute report (Eberts and Erickcek, 2002) notes the
“separate evolution of work force and economic development activities,” and finds, based on a
review of efforts in the Midwest, that despite some recent changes favoring integration, PPPs in
work force development and economic development remain fairly separate.15
Economic Development and Public-Private Partnerships: An Overview
Many sources describe the growth and evolution of the practice of economic development in the
United States, especially in cities and urban areas.16 Economic development is sometimes
considered a profession without an underlying (academic) theoretical base. While there are a
growing number of certification efforts, most notably those sponsored by IEDC, academic
“Economic Development” departments, and concentrations, and degrees are uncommon, and
few universities even offer courses in the discipline. In a sense, economic development as a
practice can only really be examined in the context of competing jurisdictions. The primary
objective of all economic development professionals is to induce some kind of economic activity
7
to take place in, or somehow benefit the citizens of, some particular location or jurisdiction, that
wouldn’t otherwise have occurred (at least to such an extent). Obviously, economic activity will
take place somewhere. As a result, the profit-making opportunities of businesses and ultimately
the consumption opportunities (and hence the standard of living) of the citizens in that locale will
rise. Of particular concern to some is that this economic activity, or economic growth, is not
necessarily efficiently, and clearly not evenly, distributed across the geographic or political
terrain. We then have the requisite initial ingredients of PPP approaches to economic
development: cases where particular business and public interests in inducing or increasing some
type of economic activity are aligned.
Kayden (2002) provides an excellent overview, consistent with our framework:
Although some development occurs within a context of traditional and distinct roles and
responsibilities undertaken by local governments and private developers, an increasingly common
pattern reveals blurred boundaries and surprising reallocations as each party participates to a
greater extent than before in what the other does. Of course, the record of “public and private
development” follows a jagged trajectory, increasing or decreasing according to political shifts,
budget realities, and economic performance. Nonetheless, if the rhetoric of the so-called “publicprivate partnership” exaggerates the reality, much urban development today is highly
commingled under public subsidy or regulatory umbrellas.
We have selected two standard state and local economic development functions where PPPs are
used and are likely to be used more in the future. While they encompass key types of economic
development strategies and programs used by state and local governments to help their
jurisdictions compete for investment and economic activity for their specific locations, our
primary focus is on their use of PPPs in those efforts.17
Businesses and politicians tend to hype the benefits—primarily jobs and economic growth—of
organized economic development efforts without a great deal of measurement and statistical
analysis of the purported link between the efforts and the outcomes. Academics, for their part,
have tended to apply more rigorous cost-benefit analyses to particular economic development
programs or projects (including those undertaken by PPPs), and perhaps not surprisingly don’t
always report positive net benefits. These findings may be in part due to their evaluating standalone actions, and utilizing rather narrow measures of benefits.18 If we have learned anything
about economic growth, it is certainly that it is the result of many market and collective forces
acting simultaneously, which makes measurement of particular components, and hence
identification and evaluation of marginal impacts, problematic.
One measure of the acceptance of a concept or approach is the formation and continuing
operation of an organization with a mission to advocate and promote it. The National Council on
Public-Private Partnerships (NCPPP) is the prime example in this arena, while other economic
development organizations, most notably the National Association of State Development
Agencies (NASDA) and the International Economic Development Council (IEDC, formerly
CUED) have increased their focus on PPPs, undoubtedly due to the interest of their
memberships. These sources are cited throughout this review.
8
What This Review is NOT
This review does not cover all types and applications of public-private approaches to government
intervention into the private marketplace, important and interesting as they may be. Also, as
mentioned above, this review is not meant to serve as a step-by-step primer for practitioners
engaged in or desiring to establish PPPs. Three excellent sources should be very helpful readings
for the economic development practitioner engaged in or thinking about PPPs:19
The first is John Stainback’s Public/Private Finance and Development: Methodology, Deal
Structuring, & Developer Solicitation, published in 2000. In this book, Mr. Stainback describes
in a clear fashion a framework for establishing and undertaking PPP real estate projects, focusing
on the various steps, components, and players involved. Drawing on his extensive knowledge
and experience in the field, he includes detailed case studies and catalogues specific checklists of
steps to take.
The second is a 1999 publication from the British Columbia (Canada) Ministry of Municipal
Affairs entitled Public Private Partnership: A Guide for Local Government. This very detailed
and readable work covers the PPP process from A to Z, including advising the decision-making
process by the public entity to partner with the private sector, implementing the partner selection
process, negotiating the partnership agreement and pointers on working with the partner on the
actual project. Although the legal terms are specific to British Columbian and Canadian laws, the
basics of the partnership discussions are also applicable to U.S. economic development
practitioners.
The third is a chapter, written by Professor Lynne Sagalyn, entitled “Meshing Public and Private
Roles in the Development Process,” in the Urban Land Institute’s popular economic
development tome Real Estate Development: Principles and Process, 2nd ed., 1996. This
informative work comments on the changes in development practice leading to PPP approaches,
and concentrates on the process of PPP formation and the various practical problems associated
with implementation.
9
3. PUBLIC-PRIVATE PARTNERSHIPS AND ECONOMIC DEVELOPMENT:
LITERATURE AND PRACTICE REVIEW
The organization of this section follows four fundamental questions that are typically posed
concerning PPPs as they are used in the two kinds of economic development efforts selected in
this report—Ongoing ED Functions and Development Projects:
1.
What are PPPs and why (and how) are they used in these particular state and local
economic development efforts?
•
2.
What has been the recent historical experience with PPPs in this arena?
•
3.
This briefly traces some of the recent history in PPP use and examines some
trends or themes.
What key issues face state and local economic development practitioners (especially
public officials) using or considering using PPPs?
•
4.
This describes the reasons for their initial and continued use as economic
development approaches, as well as the specific definitions applied to them and
who represents the public and private “sides.”
These include (i) the potential problems associated with private encroachment
into public affairs, and is sometimes referred to as the issue of governance, (ii) the
key steps in the formation of a partnership: partner selection (including who are
the players), establishing the partnership structure, negotiating the roles,
responsibilities, risk sharing arrangements and benefit distributions, and (iii)
accountability issues and monitoring methods and procedures.
Are PPPs successful? Can we identify key ingredients to “success” or those factors
associated with “failure”?
•
This deals with concepts and measurement of effectiveness and success, as well
as evaluation procedures utilized.
We note that in some instances, there are clear differences between the Ongoing ED Function
and the Development Project, while in other ways there are similarities. Where explicit
distinctions are warranted, we so note below.
Definitions and Rationale
Because PPPs are essentially mechanisms or arrangements for the provision of certain services,
their literature naturally melds into the literature of different disciplines. In this instance, there is
10
considerable overlap between the literature on economic development PPPs and on economic
development itself. The connection of interest here is how PPP arrangements are used and
whether they are or can be effective tools or approaches for achieving certain economic
development objectives. We note that this is separate and distinct from the issue of whether any
economic development objectives are in or of themselves legitimate or normatively justified.
With this caveat, we examine several definitions of economic development PPPs offered by
various sources, in order to highlight the fundamental or underlying purposes of the PPP
approach.
Recalling the basic definitions of partnerships described in the previous section, the PPP
approach to economic development is also typically thought of as a joint activity, or an
arrangement for the provision or production of something, in which there is a mixture of
“public” and “private” components. Clearly, any joint action would only be considered or occur
if both the private and public parties believe there could be gains to be made vs. action or activity
with no such partnering. In our two economic development categories, the potential advantages
of partnership include increasing the return from underutilized public assets (including land) and
leveraging private capital and experience.
The Michigan Alliance Program, a PPP initiative to increase retail development, offers a good
conceptual example of this through its description of the program’s purpose: “to explore how
public/private partnerships can work together to synthesize the needs of the community with the
interests of private investment strategy.”20 At the other end of the conceptual spectrum,
Bomersheim (2002) drives straight to the operational (and perhaps legal) heart of the matter,
defining a PPP as a “contract, pure and simple.”
On its website, the IEDC offers two answers to the question “Why do PPPs form?” First, the
“need for a broad range of skills, information and finance in many economic development
projects” and second, “small public-private partnerships are being created to focus on smaller
geographic areas for better access to funding programs, reaching out to public and private
stakeholders in the community, and recruiting community volunteers.” These reasons are echoed
by Kozmont (2001):
Collectively, both sectors can bring different areas of expertise to the process of planning,
programming, designing and constructing cost-effective buildings. Public/private partnership also
can have joint financial benefits resulting from the use of local economic development and
redevelopment initiatives, helping to improve a community’s “quality of life” through the
generation of increased tax revenues
As implied in the previous section, virtually every economic activity fits the broad descriptions
outlined in our classification. However, a synthesis of the popular understanding of PPP is much
narrower. While keeping the central focus of the joint activity, sources typically add the
conditions that (a) the public and private actions/participation/roles/responsibilities and (b) the
explicit sharing of risks, costs, and financial benefits are specified and agreed upon in some type
of formal or quasiformal arrangements at the onset of any project or activity. (Sagalyn, 1996;
Peters, 1998; Stainback, 2000; Beauregard, 1998; Davis, 1986; Haider, 1986; Linder, 1999;
11
Woodward, 1994). If these characteristics appear too static, Stephenson (2000) adds the
condition that a PPP “implies a dynamic interactive collaboration between sectors.”
The National Association of State Development Agencies’ definition of a PPP is consistent with
many found in the literature and practice: “a contractual agreement between a public agency
(federal, state or local) and a for-profit corporation. Through this agreement, the skills and assets
of each sector (public and private) are shared in delivering a service or facility for the use of the
general public. In addition to the sharing of resources, each party shares in the risks and rewards
potential in the delivery of the service and/or facility.” www.nasda.org, (2002).
Stephenson (1991, p. 111) and others explicitly delineate between the two uses of PPPs
identified in this review: PPPs that are essentially a real estate development deal or transaction
specific, and do not continue in any formal fashion after a project has been completed (our
“Development Project”), and those that describe ongoing organizational relationships combining
both public and private actors engaged in economic development activities (our “Ongoing ED
Function”). He notes the Stainback (2000, p.11) defines in more detail the first type of PPP as:
“The close collaboration of a public entity(s) and a private entity, or team, to structure, negotiate
and implement the finance, design, development construction and operation of building(s).” Of
course, both types share the objectives of combining public and private resources to improve the
local economy.
Some authors avoid a specific definition altogether. Rather than “provide a definite and
stipulative definition of a partnership,” Peters (1998) identifies several characteristics deemed
essential to the establishment and success of partnership arrangements: (a) two or more partners,
with at least one a public entity, (b) each participant is a principal, able to bargain and decide on
its own authority, (c) the arrangement is a continuing relationship, (d) each principal brings
genuine value to the partnership, transferring real resources (value) to the partnership, and (e)
there is shared responsibility for the outcomes of the partnership’s actions.21 This last condition
excludes private “advisory” roles to government, where the public sector retains sole decisionmaking control. Peters goes on to suggest some features distinguishing among different types of
partnerships. The first is number of partners involved; another is how formally the partnership
arrangement is established, and finally the purpose of the partnership. Similarly, in discussing the
findings of a 1994 survey conducted by the International City County Management Association
(ICMA), Walzer and York (1998, p. 48) note that any “meaningful discussion of public-private
partnerships requires a clear identification of the partners, types of investments made, and the
outcomes expected from the ventures.” They go on (p. 49) to identify “three basic ingredients” in
the PPPs studied: (1) intended to be long-term agreements, (2) established, written procedure for
management of the partnership, and (3) agreed-upon economic development outcomes or
objectives.
Recent History
Understanding the genesis and growth of PPPs is helpful to understanding how they are viewed
by researchers and practitioners alike. We have already noted the economic reasons why
12
partnerships form in general, and a good part of this literature examines why they have become
so commonplace in the economic development arena in recent years. However, given the
different definitions of PPPs, it’s not surprising to see some differences in describing the history
of PPPs in the practice of economic development.
While there are ample examples of public-private arrangements and efforts related to economic
activity over the course of U.S. history, much of the literature concentrates on the period since
the late 1970s. Since that time, we may roughly identify two distinct phases or periods of
significant interest in the use of PPPs. The first period of intense discussion and examination of
PPPs coincided with the urban crises and macroeconomic problems of the 1970s and the
onslaught of the new fiscal federalism, or “devolution,” set in motion by the Reagan
administration in the early 1980s and spurred by the recession. Economic development interest
focused on urban areas at the time, when Fosler and Berger (1982) hypothesized/forecasted that
“constraints on federal funding would cause more governmental responsibility to shift to the
state and local levels, and that the constraints on government at those levels would implicitly
place a greater burden on the private sector in dealing with urban problems.” Similarly, GFOA’s
John Petersen (1985) noted succinctly: “Public/private cooperation is one response, and a
celebrated one, to the crunch on public resources.” However, recalling the changes in
governance from “rowing to steering,” Stoker (1998) adds an additional dimension to this view,
suggesting that “the increased use of partnership appears to be a part of a broader shift in the
process of governing.”
Interestingly, this first phase reflects the lingering focus on the role of the federal government in
the PPP approaches to state and local economic development. The “fiscal devolution” associated
with the Reagan administration hadn’t really come into full swing, and federal programs such as
UDAG and others heavily influenced PPP discussions and interest. HUD’s “Office of Public
Private Partnerships” was established in 1979 with a $1 million budget, and axed in 1981,
making it rival the dot.bomb craze in duration. (Jamison, 1982; Sagalyn, 1996; Beauregard,
1998)
A second wave of PPP interest and analysis followed the real estate and stock market collapses
of the late 1980s and the ensuing 1990–91 national recession. This economic downturn is seen as
an important catalyst to increased PPP use by forcing government officials to “reevaluate
approaches to simulating and maintaining a vibrant economic environment” (Kolzow, 1994). As
in the first phase, most interest in and applications of PPP to economic development centered on
urban fiscal and economic crises. Once again, cities and states (especially older and slower
growing) found themselves in dire fiscal straits and searched anew for approaches to maintaining
and expanding economic investment and activity within their borders. As with the first phase,
most interesting and common applications of PPPs to economic development centered on
responses to urban fiscal and economic crises. However, this time the role of the federal
government, or more accurately, its “minor role,” was firmly established by this period, and the
activity and discussion focus was on state and local efforts.
13
This second wave essentially continues today, tempered by a long national economic expansion
that (1) did not always translate directly into significant state and local government tax and
revenue increases and (2) did not truly reverse the declining fortunes of many older central cities.
Fiscal constraints at the state and local levels remained throughout the 1990s, and have even
become more severe in 2001 and 2002. Thus, the essential ingredient, limited public-sector
resources, remains in place, auguring for continued, if not increasing reliance on PPPs as a
strategy for economic development.
Finally, in an interesting discussion, Stein (2000) offers a chronological view with a geographic
dimension to the history of PPPs in economic development over the past quarter century:
beginning as emergency measures in the job-hemorrhaging Rust Belt, PPPs moved south and
west, utilized more strategically by Oil Patch cities looking to reconfigure their post-oil
economies, and then to the West Coast in “response to the ‘peace dividend.’” In each case, the
impetus for PPPs was a sense of economic urgency, and the realization that the normal powers of
the public sector would be insufficient to avoid significant declines in the areas’ economies.
Key Issues and Findings
While PPPs enjoy widespread support as approaches to economic development, there are
important issues concerning their nature, the process for determining their appropriate use, and,
ultimately, their effectiveness. Since economic development practitioners must deal with all of
these issues, awareness of past experiences and analyses may be helpful.
Governance: Perhaps the central issue or concern is the appropriateness of mixing private
activity with public activity at all.22 At the core of this concern is whether the private profit
motive is fundamentally incompatible with public purpose. The term governance has been
defined in many ways, and has recently been the subject of significant theoretical study of
political economy and political science. Most consider it separate and distinct from government,
which typically refers to the institutional framework for society’s collective decision making.23
Stoker (1998) blends several definitional themes into a “baseline” definition that emphasizes the
process of making public decisions:
…it refers to the action, manner or system of governing in which the boundary between
organizations and public and private sectors has become permeable. The essence of governance is
the interactive relationship between and within governmental and non-governmental forces.
Some have linked governance to the shift in government’s traditional role from “rowing to
steering” as suggested in Osborne and Gaebler’s 1992 Reinventing Government. Consequently,
concern about the relative roles and distribution of costs and benefits between the public and
private partners—and how the public decision-making process is set up to determine these—is
the focus of recent studies on governance of PPPs.
On one side of this issue are people who believe PPPs do fundamentally lead the private sector to
encroach on public-sector decision making in an undemocratic way. Under this view, PPPs can
14
not only blur the distinction between what is legitimately private and legitimately public, but also
can push or shift public activity “too far,” in a normative sense, into private control. (Jezierski,
1990; Sagalyn, 1996; Guldbrandsen, 2002; Pierre, 1998; Peters, 1998; Linder, 1999; Stoker,
1998; Ghere, 1996 and 2001) As a result, key public characteristics of activity, including (a) the
democratic process for determining public resource allocation, (b) public accountability and (c)
social justice (or redistribution and equity concerns) may take a back seat to private profit
motives.24 Note that this concern is independent of (but often related to) the particular economic
development effort itself. At the crux of this legitimate concern is the potential for private
interests to use the unmonitored partnership as a vehicle to exercise undo influence over public
resource allocation decisions, steering such resources to themselves at the expense of the
commonwealth. Clark (1998) describes a particular view of partnerships as “myths.”25 The basic
myth is that the public sector is too incompetent to properly coordinate and engage in productive
economic development activities. On the other hand, the private sector is efficient, highly skilled,
and innovative, but doesn’t take into account public costs and benefits. Therefore, the public
sector must tap into the private sector if it wants to have successful economic development
programs. These myths add up to a partnership that serves as a cover for private, wealthy, and
powerful interests to take advantage of the public sector (and hence the less than wealthy and not
so powerful).
PPP advocates argue that these concerns are overstated. One cites the “most compelling prima
facie evidence (of compatibility) is that governments and those who work closely with
governments are the most fervent supporters of public-private partnerships and fully understand
their value…” (NCPPP, 2002). While this evidence may hold up to neither statistical hypothesis
testing nor theoretical justification, it does seem to hold at least some normative value, in that the
public-sector decision makers are ultimately held accountable by their electorates. Still, the fact
that public-sector officials like to use PPPs for economic development efforts may not
satisfactorily address the concerns delineated above if there is fear that public officials’
incentives are not always aligned with the public or that public officials can get “taken to the
cleaners” by their private partners during the negotiations or during the implementation of the
partnership.
It is likely that the increasing use of PPPs in economic development will provoke more intense
review and scrutiny of the balance (among the partners) of benefits and costs accruing from the
PPP activity. Several steps may improve the probability of achieving a proper balance. One is the
requirement of a “statutory foundation for the implementation of each partnership,” that should
strengthen the hand of the public partner. (NCPPP Website, 2002). A second is making sure the
process is as open and reviewable as possible, from conception to completion. A third is to
carefully negotiate and formally establish the terms and conditions of the partnership agreement,
as explicitly as possible, to avoid questions of interpretation and other possible problems down
the road.
Governance concerns are also invoked when the issue arises of whether PPPs (or rather the
proponents of partnerships) should take on advocacy roles. At issue once again is the potential
negative influence on public decision making. One particular form of advocacy endeavors to
15
change existing federal, state, and local laws and regulations that are seen as barriers to more
effective and widespread use of PPPs for economic development. The National Association of
State Development Agencies (NASDA) identifies several federal policies they believe “place
significant obstacles to development of public-private partnerships that promote the use of
private-sector resources to meet public needs,” and offers some remedial actions:26
•
Amend the federal tax code to remove PPP project private activity bonds from state
volume caps “to allow innovative and more cost-effective projects.”
•
Change tax and labor law restrictions to allow public pension fund
flexibility/portability—thereby allowing public-sector employees to keep their
positions in public employee pension funds if they transfer to a private-sector firm
under a partnership and to allow their new private employers to make pension
contributions to these funds
•
Amend federal grant/loan policies and regulations where appropriate to allow private
companies as partners, as long as ownership remains in the public domain.
Partnership Roles, Structuring, and Negotiations: Development Projects. The potential
benefits for public and private partners from a successful PPP real estate development have been
identified and examined by many observers (Stainback, 2000; Morlock, 1993). Economic
development officials should be careful to note what steps and trade-offs are actually involved in
a PPP real estate development project. Typical projects require a series of actions from
conceptualization through to project completion, successful operation, and beyond. Since the
objectives of the public and private partners can be different, and mutually exclusive, the
negotiation trade-offs aren’t necessarily as clear-cut as between two private parties. In addition to
the economic success of the project itself, two related factors influence how each partner views
its own success: (1) the contractual allocation of costs, risks, responsibilities and economic,
fiscal, and financial returns and (2) the enforcement of these contractual arrangements during the
timeline of the project. These are determined as the partnership agreement (and the project
itself) is structured and negotiated.27
The nature and structure of the PPP agreement itself is particularly important. Morlok (1993)
describes eight common-sense “guidelines for choosing a partner and making the relationship
work.” These include careful selection of a committed partner, honesty and clarity about goals
and objectives, and specific language detailing roles, responsibilities, and decision-making
authority. Obviously, the selection of a (or which) private partner is vitally important. Whenever
possible, some type of competitive-selection process should be utilized, both for appearance
reasons and for obtaining the most aggressive or committed private partner. (Stainback, 2000;
Sagalyn, 1996)
Public officials must become familiar with real estate development and finance (or at least have
good advisors) in order to negotiate a partnership agreement for a development project. This
includes a clear understanding of the nature of the project and the development financial pro
16
forma calculations used to apportion the costs (including risks) and benefits of such projects to
both the public and the private sides. As Kayden (2002) notes
…public actors must understand the financial realities of private real estate development and its
deal structures in order to negotiate effective public-private partnerships or impose reasonable
regulatory burdens. Private actors must understand a broad spectrum of public goals and develop
the navigational skills befitting an environment in which government regulation and public claims
on private profit may be expected to continue. Both parties must understand how this new
equation reassigns entrepreneurial risk and public interest oversight, and how such reassignments
have intended and unintended consequences on the physical development of cities.
But these do not mean that negotiations should mimic a private deal between two private parties.
As noted above, there are two fundamental differences between the public and private sectors.
First is the nature and types of costs and benefits associated with some action. Since costs and
benefits are valued collectively, it is impossible to determine the exact values. It is clear that they
are different from the assumed financial profit maximizing behavior of the private agent. Second,
satisfactory PPP negotiations also require the determination of an “appropriate” public discount
rate, which may very well differ from the discount rate used by the private partner. Applying the
different discount rates to the development pro forma may prove helpful in the public decisionmaking process, as it may help justify the allocation of some costs or benefits sufficient to make
the project work, while appearing to be one-sided in favor of the private partner. This point is
important. As noted above, the objectives of public and private partners are different. If the
partnership structure is evaluated based on a private-private model, it will seem unsatisfactory.
In practical terms, there are lots of informational asymmetries that can lead to bargaining
advantages for one side or the other, typically to the disadvantage of the public partner. All
efforts should be made to establish good-faith negotiations. Philadelphia Commerce Director
James Cuorato stated a principal consideration behind the negotiation of a PPP agreement
succinctly: “It has to be a real “partnership,” and both sides need to realize this. Both sides have
to hold up their end of the bargain—as simple as this: private developers can’t expect the public
to do everything and the public can’t expect to push off all responsibility to the (private)
developer” (Cuorato, 2002).
Several academic studies suggest public partners often or typically bear greater costs and risks,
exercise less control and receive lower returns relative to normatively “fair” allocations.
(Guldbrandsen, 2002) This can obviously be true even if different objective functions are taken
into account. Blame is often pinned on the public sector’s poor ability to negotiate PPP
agreements from positions of strength, resulting in the lack of planning and implementation
control, oversight capability, and ability to assess costs. As a result, strengthening the public
partner’s hand in negotiating is of prime concern to some analysts (Stainback, 2000; Sagalyn,
1996; Clark, 1998). This primarily involves paying greater attention to the pre-development
project steps:
•
•
Careful conceptualization of the project
Formal private partner selection procedures
17
•
•
Clear delineation of project costs and benefits
Clear delineation of partner’s roles and responsibilities
Dangers here may include the process becoming too lengthy, public partners lacking necessary
competency, and the potential private partners shying away from large upfront expenses.
While sharing some characteristics with project PPPs, ongoing economic development PPPs
have their own issues. The nature of such activities is fundamentally different from a real estate
development project, and hence they have different benefits and costs. The Upjohn Institute
study referred to earlier identifies (a) active business involvement and (b) an atmosphere of
cooperation among government, community organizations, and business as two necessary but
not sufficient conditions for efficient and effective PPPs.28 Interestingly, they note that the lack
of the federal government’s leadership role in state and local economic development may
account for “the wide variety of arrangements across states and localities” in PPPs when
compared to PPP activity in work force development. They suggest that as state and local
economic development becomes less of a zero-sum game, “there is more reason for federal
government to reenter the game,” for example, in industry modernization programs and regional
industry cluster efforts. This could possibly lead to more formalized structures for state and local
economic development PPPs. (Eberts & Erickcek, 2002, pp. 36–39).
Role of Public Real Estate: Development Projects: Several sources emphasize the value of
publicly owned land and assets to PPPs. (Stainback, 2000; Sagalyn, 1996). Land and buildings
can be among the most important public-sector contributions to a PPP project. The public sector,
in its various forms, owns or controls significant amounts of unused or underutilized land,
buildings, and structures. Fiscal pressures on state and local governments have forced
governments to seek greater financial returns form these assets. Increasingly, joint development
via PPPs has emerged as an attractive alternative to the outright sale of these assets.
Real Estate PPP projects utilizing public land and buildings can take essentially three forms,
when classified by the use of the new development:
1. Public land and buildings used exclusively for private development, with some
combination of sale proceeds and participation in the development’s financial upside
as well as indirect benefits accruing to the public: fiscal (tax revenue) and economic
(increased economic activity and employment opportunities).
2. Public land and buildings used for a combination of public and private uses,
including mixed-use developments such as transit-oriented development (TOD).
3. Public land and buildings used exclusively for government operations, but is
developed, designed, built, operated, and/or managed to some degree by private
firms.
These forms of PPP are emerging as attractive alternatives to the outright sale of public assets,
allowing the public sector the ability to maintain ownership, some control, and some financial
18
upside to the development. They can positively influence the local real estate market either by
making specific areas more attractive to additional private-sector investment or by increasing the
overall efficiency of the government.
Various public and quasipublic entities have been established in different cities and states to play
the role of the public partner in real estate development projects in the first category. Genesis LA
(Los Angeles), the Penns Landing Corporation (Philadelphia), and the National Capital
Revitalization Corporation (NCRC, Washington, DC) are illustrative examples.29 On its website,
Genesis LA identifies itself as “a cutting-edge initiative aimed at transforming abandoned and
blighted properties throughout Los Angeles’ most disadvantaged communities” via “innovative
financing vehicles that provide “last resort” gap financing” for real estate development in the
inner city. Penns Landing Corporation was established by the City of Philadelphia as a PPP to
develop and manage the central Delaware riverfront, providing land, public financing, and
associated services to private developers. According to its website, NCRC is “a public-private
entity designed to serve as an important manager of major development projects in the District of
Columbia,” with a mandate to use “a myriad of incentives and other economic development tools
. . . to shape development in the District's downtown and neighborhoods.”
As an example of the second category, Greater Philadelphia First, a group of executives of large
businesses in the Philadelphia metro area, is proposing to establish a “public-private partnership
between (sic) the state, counties, sponsoring public transportation agencies and private-sector
transit and real estate developers” to present “innovative public-private strategies for funding,
developing and managing the Schuylkill Valley MetroRail (MetroRail), a proposed 62 mile
regional commuter rail line that will connect Philadelphia to Reading and its western suburbs
along the Schuylkill River.” (GPF, 2002). An integral component of this project is expected to be
capturing some of the private economic value created by the transit project for use in the
financing.
Accountability and Monitoring: Of critical concern to the public is the ability to monitor the
activities of PPPs. Indeed, accountability is one of the hallmarks of resource allocation in the
public sector. By its very nature, private decision making is not always open and transparent, and
the appropriate use of public resources, and the appropriate distribution of publicly generated
benefits are key public considerations. In their analysis of the results of a 1994 ICMA survey of
194 cities, Walzer and York find that “the vast majority (79.8 percent) reported that the
partnership agreements are monitored to make sure they are met. The monitoring most often
included periodic reports by businesses and annual meetings with business leaders.” (Walzer and
York, 1998).
The IEDC Web site notes one of the prime advantages of PPPs:
Both the public and private organizations who form these non-profits contribute either
financially or “in kind” support . . . . Public-Private partnerships acting as a strong voice
for the interests of local businesses, while also possessing immediate access to the highest
levels of local government. These organizations have greater flexibility than the public
19
sector to conduct economic development activities since they do not have to answer to
such a broad constituency.
But this advantage is exactly what worries some observers when considering the potential
divergence between private business interests and public accountability. Peters (1998) highlights
the government’s trade-off when using PPPs: giving up “some of its autonomy and potentially
some of its authority for the cooperation of the private sector.”
Some cities have established more formal review and oversight processes. A description of
Seattle’s new process, along with information for participants includes the following:
Panelists serve in a volunteer capacity on this official City panel which reviews and
comments on certain public-private partnerships between the City of Seattle and private
entities, including nonprofit organizations. The panel is part of a new process, called P4,
which the City is using to ensure that it critically examines whether a proposed publicprivate partnership would meet public benefit objectives.30
Among the twelve “P4 Panelists’ Guiding Principles” are: “they understand that their mission is
to help the City examine the public benefit elements of certain proposed public-private
partnerships” and “Panelists recognize the cost limitations of proposed projects. Panel
recommendations will be as cost effective and efficient as possible.” Because public review can
be a scary prospect for many in the public sector (not to mention for those in the private sector),
Seattle adds a constraining principle: “Panelists recognize that the City has proposed a project
that City staff have reviewed and believe is viable and in line with City goals.”
Measurement and Performance Evaluation
Are PPPs successful? First, it is difficult to disentangle success of PPPs from success of
economic development efforts in general. As economic development practitioners well know,
there is a growing debate about the appropriateness (as well as the success) of economic
development efforts in general, and this spills over into evaluation of economic development
PPP efforts. For example, was a policy, program, or project unsuccessful because it was wrong
in concept, or because it’s implementation was hampered by a PPP approach?
Therefore, it may be better to restate the question: “Are PPPs effective approaches to particular
economic development efforts?” Even that is hard to determine since the literature lacks specific
definitions and measures and, for the most part, sufficient data with which to evaluate success.
New York City Partnership Executive Director Frank Macchiorola’s 1986 observation still rings
essentially true today: “. . . the most difficult aspect of partnerships may be determining and
measuring success. Few organizations can be used as reference points, and there are few forums
for discussing what can be done.” (Marcchiorola, 1986). While today we do have more
reference points, it’s not clear that we have a much better understanding of defining and
measuring success.
20
In order to evaluate the success of PPPs, there has to be some consensus on what exactly is to be
measured, whether quantitatively or qualitatively.31 And obviously, a real estate-based PPP
development will have different measures of success than would an ongoing PPP established to
help market a region to potential businesses, investors, or workers. In fact, for the latter, the mere
establishment and continued existence of a PPP can be seen as success in itself. This does appear
to be used as a substitute measure for success, as PPPs in the Ongoing ED function category are
harder to quantify, primarily because their outputs are difficult to define and measure.
Conceptually, we might think of considering a PPP “successful” if it (a) increases the probability
of a good economic development effort being successful and/or (b) it increases the net benefits to
one or more of the partners, without decreasing that of any partner. While this still leads to
practical measurement and evaluation limitations, we can generalize some findings about the
effectiveness of PPPs in economic development. There does seem to be some evidence that PPP
approaches can generate efficiency gains for the jurisdictions involved, if for no other reason that
they can leverage or combine private-sector capital and talent to direct investment and the
location of economic activity. While much of the advocacy literature and practice argues the
PPPs are fair and responsible partnerships, some of the more academic literature suggests that
the public-sector partners may often bear greater risks and costs relative to the distribution of
partnership benefits. Confounding the entire discussion, however, is the difficulty in identifying
and valuing the costs and benefits (which require normative value judgments), so there is room
for honest disagreement and continuing analysis and debate. Related to this is the fact that since
no two jurisdictions are identical, there is no uniform definition of success. What may seem
excessive public participation or risk-assumption in one jurisdiction (and hence an
“unsuccessful” PPP), may be very appropriate in another.
In one of the more rigorous evaluations undertaken, Stephenson (1991, p. 113) states the
evaluation case succinctly: “Partnerships necessarily combine the relative strengths and
weaknesses of each sector . . . . Accordingly, public-private partnerships may or may not result
in efficient, effective, or distributionally-equitable outcomes depending on the interplay of local
sectorial characteristics and relationships.” He defines “dimensions” of PPPs, and asks what are
clearly important questions for evaluation: whether (i) they can produce efficient outcomes, (ii)
they can be considered politically effective, (iii) the partners can overcome significant
differences to create “viable operating entities,” and (iv) PPP benefits are distributed equitably to
citizens of the public partner’s jurisdiction. With regard to the efficiency condition, he concludes
that there are significant obstacles, primarily due to informational and incentive asymmetries, to
PPPs being efficient capital-market intervention strategies.
Other evaluations were based on varied criteria. Grant and Hall reviewed economic development
“public-private partnerships” in 25 U.S. metropolitan areas and concluded that standard
definitions made it difficult to evaluate their effectiveness (as well as their very existence, in any
bona fide form). They developed three models to form the underlying basis for analysis of
partnerships’ effectiveness as economic development approaches, finding mixed results (Grant &
Hall, 1998). Stein (2000) suggests the more successful PPPs are those “driven and led by the
private sector,” because private businesses are more results-oriented and are less constrained
21
than most public-sector entities in terms of jurisdictions, activities, time horizons, and financing.
For many, private-sector leadership is seen as a key role in the success of PPPs. (Rockefeller,
1986; Stainback, 2000; NCCCP, 2002). In a qualitative assessment of performance, based on a
survey of 194 cities, Walzer and York (1998) found that “partnerships are taken seriously by
local governments” and cities “reported a high degree of satisfaction with the partnerships and
that a relatively high percentage of the partnerships are considered successful in that they
provided a reasonable return to the city.”
Despite the lack of universally accepted or conclusive evidence on effectiveness, in efficiency
and equity terms, it does appear obvious that PPPs will continue to grow in importance as
approaches or specific tools for conducting various types of state and local economic
development programs. They are politically popular, and they are generally viewed positively by
the business community as a method for contributing talent and capital, as well as assuring their
input into important economic development decisions. In addition, several common
characteristics appear to be associated with “successful” PPPs:
•
•
•
•
•
Receptive and supportive public sector to a partnership approach
Clear objective(s), with well-defined, limited, and measurable objectives
Clearly delineated (via fair negotiation) roles, responsibilities, and shared risks
Active and meaningful participation of all partners
Satisfactory accountability and openness with the public
However, the characteristics that appear to be associated with “successful” PPPs may differ
depending upon whether you view them from the private or the public side. In 1986, David
Rockefeller identified five key characteristics, from the private-sector viewpoint, that are
probably still appropriate today:
•
•
•
•
•
A strong and comprehensive private-sector organization
Personal participation of the CEOs involved
A clear mission, with well-defined, limited, and measurable objectives
Receptive and supportive public sector
Good communications32
From the public side, NCPPP identifies five ingredients of success for PPPs, with an important
caveat: “While there is not a set formula or an absolute foolproof technique in crafting a
successful PPP, each of these keys is involved in varying degrees.” In condensed summary, the
five “critical components” are as follows:33
•
Political Leadership (“commitment from the top”)
Senior public officials must be actively involved, show significant support for the use
of PPPs, and take strong leadership roles in the PPP. A well-informed political leader
can play a critical role in minimizing misperceptions about the value to the public of
an effectively developed partnership.
22
•
•
•
•
Public-sector involvement
Public-sector officials must also remain actively involved in the project or program.
On-going and frequent monitoring of the performance of the partnership is important
in assuring its success, especially to counter any claims of lack of accountability.
A well thought-out plan
Careful planning (often done with the assistance of an outside expert in this field) will
substantially increase the probability of success of the partnership. “This plan most
often will take the form of an extensive, detailed contract, clearly describing the
responsibilities of both the public and private partners. In addition to attempting to
foresee areas of respective responsibilities, a good plan or contract will include a
clearly defined method of dispute resolution (because not all contingencies can be
foreseen).”
Communications with stakeholders
Partnership stakeholders, including “affected employees, the portions of the public
receiving the service, the press, appropriate labor unions and relevant interest groups
will all have opinions and frequently significant misconceptions about a partnership
and its value to all the public.” Open and candid communication is key.
Selecting the right partner
“The ‘lowest bid’ is not always the best choice for selecting a partner. The ‘best
value’ in a partner is critical in a long-term relationship that is central to a successful
partnership. A candidate's experience in the specific area of partnership being
considered is an important factor in identifying the right partner.”
On the other hand, PPPs that appear to not exhibit these same characteristics may be associated
with less-than-successful or unsuccessful PPPs efforts. But even unsuccessful PPPs can have
some positive impact. Haider (1986) judged PPPs to have a mixed performance in Chicago’s
1980s economic redevelopment, but noted they were instrumental in dismantling the “older
order” of the city’s public sector: political machines and all-encompassing bureaucracies. We
may or may not consider those fully dismantled, but PPPs may well have spurred a more
entrepreneurial behavior by public-sector actors.
23
4. IMPLICATIONS FOR ECONOMIC DEVELOPMENT PRACTIONERS
Economic development practitioners are faced with an ever-changing economic and
demographic landscape with increasingly tougher competition from other jurisdictions for
location of business investment and economic activity. And they face this with decreasing
financial and nonfinancial resources at their disposal. The lure of potentially leveraging private
capital, not to mention soliciting private-sector assistance in general, will in all likelihood grow
stronger. If not already, these practitioners will often be faced with the option of approaching
some economic development effort via a PPP arrangement. A basic understanding of the
experience of their peers can be helpful.
Overall, it appears obvious that PPPs will continue to grow in importance as an approach to the
practice of economic development, particularly in the two areas of this study: Ongoing ED
Functions and Development Projects. They are generally considered to be effective, in that both
the public and private sectors appear to derive benefits from such arrangements. From a diverse
literature and practical experiences, we can cull several implications of interest to economic
development practitioners.
General Implications
Strengthen public acceptance of PPPs. Economic development officials (indeed all public
officials) should educate the public about the potential benefits of partnerships by explaining that
partnering with the private sector need not be zero-sum or losing propositions. The mutual
advantages of partnerships in general should be noted and discussed. The public should
understand that without such partnerships, mutually beneficial opportunities may be passed by,
making all parties relatively poorer.
An approach, not the solution. PPPs in and of themselves will never be “the grand solution” to
all economic development issues, including those manifest in declining urban areas.
Expectations should be tempered and realistic; PPPs should be viewed as tools or approaches or
mechanisms for economic development actions, not necessarily appropriate for all efforts, nor
for all governments. As Peters (1998) concludes his study, “Partnerships are an important
instrument for government intervention into society. They are neither the answer to all problems
of public policy, nor are they a totally symbolic and ineffective mode of action.” Way back in
1986, as concerns about privatization and devolution crescendoed among many, William
Woodside addressed a New York City Partnership, Inc. conference with comments that can
easily extend to economic development:
When we look at the constellation of complex domestic problems this nation must address—
poverty , hunger, homelessness, unemployment, and public education—I think we must
recognize that public-private partnerships will prove to be an inadequate vehicle on which to
depend. These partnerships can help us find some innovative solutions to certain aspects of those
24
problems . . . But they cannot, by themselves, solve major social problems, and we must not act
as if they can.”34
As a corollary, economic development practitioners know that all types of economic
development activity are subject to increasing scrutiny as appropriate public policy. Cost-benefit
justification (as well as the distribution of benefits) for such activity is more and more a part of
the public debate. As a result, even stronger justification for PPP approaches may become more
important as time goes by, especially for development projects with private-sector developers.
Control against undo private influence over public resource allocation decisions. While some
caution that PPPs should not be expected to solve all of society’s problems, others express
concern that PPPs (1) have been and will be used as excuses to reduce the public sector’s role in
certain realms of social policy, and (2) will cede too much control of the public agenda (and
resources) to certain private interests, leading to efficiency and equity problems.
As a corollary here, practitioners and elected officials should strive to get the public to look
beyond the exaggerated dichotomy of public and private sectors, locked in harrowing zero-sum
games and recognize that PPPs can offer opportunities to create net gains for both the public and
private sectors.
Implications Peculiar to Development Projects
Be accountable and as transparent as possible. A significant downside to using PPPs in
economic development efforts is the appearance of impropriety, in particular the potential for
the private partner to “take advantage” of the public. Lack of openness or opportunity for public
review naturally adds to uncertainty about whether the PPP’s activities are on the up-and-up.
Negotiate professionally, but remember the nature of public benefits. For projects where there
is deemed sufficient public (in terms of all economic development goals) and private financial
return to warrant significant levels of investment from both sectors, it is important to negotiate a
formal partnership arrangement between the public and private actors, setting forth the roles and
responsibilities of each party. The public-sector actors should remember that many of the
potential public benefits are not strictly financial, as they are typically for the private partner.
Identify underutilized public assets and leverage those to create value for both private and
public partners. The public sector owns or to some degree controls many valuable assets,
especially land. To the extent these otherwise underperforming assets can be used, via a PPP
arrangement, to create additional economic value (and corresponding tax revenues), fiscally
strapped jurisdictions should carefully consider such opportunities.
Implications Peculiar to Ongoing ED Functions
Define and agree up-front on quantifiable measures for evaluating success. In the often
intangible and complex world of economic development, it is especially important to identify
25
and define the outcomes as carefully as possible and agree upon what measures will be used to
judge progress or failure. Economic development officials do not work in a vacuum; daily
economic activity changes virtually every economic variable. In evaluating the success of this
kind of PPP, it is important not to mistake the influence of other actions (besides the PPP
activities) on the outcomes under consideration.
Be accountable and as transparent as possible. The significant downside noted above, the
appearance of impropriety, may be more of a hindrance for Ongoing ED Functions because
unlike a visible real estate development project, this type of PPP is basically intangible. Here, a
lack of openness or opportunity for public review may add even greater uncertainty about
whether the PPP’s activities are on the up-and-up.
*****
Are PPPs the answer to all of life’s problems? Peters (1998) concludes his study: “Partnerships
are an important instrument for government intervention into society. They are neither the
answer to all problems of public policy, not are they a totally symbolic and ineffective mode of
action.” Our review of the literature and practice leads to a similar conclusion, and we suggest
that (1) PPPs can be appropriate as viable, alternative approaches to certain types of state and
local economic development efforts, and (2) public-sector officials (especially) should continue
to search for new partnership opportunities, while paying careful attention to fundamental
partnership issues: purpose, structure, governance, roles, risk-sharing, and distribution of
benefits.
26
5. APPENDICES
Categories of Economic Activity: A Classification
Combining the two basic approaches from Section 2 allows us to classify economic activity in
four distinct categories, along with some of their characteristics and examples of overlap
(referred to as “border-crossing” in the text) or intervention of public into private or private into
public. Examples of border-crossing “entries” are highlighted for each category. This
classification allows us to “place” all PPPs into appropriate categories:
A.
Private production and consumption (private markets)
a.
b.
c.
Profit motives for firms, utility maximization for consumers
Decentralized, private decision making
Production theory and cost minimization
•
B.
Public production (or provision) and consumption (public goods and taxation)
a.
b.
c.
d.
Public choice theory: collective decision making
Public production and bureaucracy: public goods and services
Taxation theory and revenue-raising mechanisms
Redistribution to accomplish communal equity objectives
•
C.
PRIVATE entry: joint ventures, contracting out, vouchers,
franchising, coordinated production
Private Investment (infrastructure and capacity; private financial markets)
a.
b.
Physical capital: plant and equipment (including technology)
Human capital (higher education and training)
•
D.
PUBLIC entry: subsidies, taxes, regulations
PUBLIC entry: subsidies, taxes, regulations
Public Investment (public works and infrastructure; financial markets)
a.
b.
Physical capital: public infrastructure and public plant and equipment
Human capital: (education and training)
•
PRIVATE entry: joint ventures, contracting out, vouchers,
Franchising, coordinated production, financial markets
27
PPP Sources
Several organizations actively promote and research PPP approaches, give guidance, and
compile case studies of actual public-private partnership entities, deals, and projects. These
sources can be extremely helpful to practitioners. In some cases, such information or services are
proprietary and available only for a fee or to the organization’s membership. The case studies
vary somewhat in content, but many include details on the type and nature of the public-private
partnerships involved, along with some evaluation methods.
Listed below, in no particular order, are some key organizations with economic development
PPP connections:
A.
Urban Land Institute
ULI PPP Case Study Database:
• http://www.uli.org
The Urban Land Institute maintains an extensive and informative proprietary electronic
database of real estate development project case studies that can be searched with key
words including “public/private partnership” and “public/private cooperation.” Each
project’s detailed case study provides varying degrees of information about the nature
and role(s) of the PPP in the development. In addition to the detailed case study, a
summary is provided for each project, highlighting the important features, including PPP
components.
B.
National Association of State Development Agencies (NASDA)
National Resource Center on Public-Private Partnerships:
• http://www.nasda.com/
This recently created National Resource Center focuses on compilation, analysis, and
promotion of PPP approaches to state economic development efforts. NASDA
disseminates information and conducts workshops about PPPs and “has helped develop a
chart of economic development partnerships and a history and analysis of successful
partnerships.” Interestingly, they note that, “as many as half the states have been involved
in serious exploration of new organizational options, and at least three states have gone
totally private, while many more have opted for hybrid partnerships.”
C.
International Economic Development Council
Economic Development Reference Guide: Public-Private Partnerships:
• http://www.iedconline.org/hotlinks/Pubprivpart.html
IEDC Best Practice Cases In Public-Private Partnerships:
•
Public-Private Partnerships, Roles in Economic Development of 25
Metropolitan Institutions.
http://www.iedconline.org/commentary_spring98.html#6
28
Web-based Resources For Public-Private Partnerships:
Select Regional Public-Private Partnerships
D.
•
The Bay Area Marketing Partnership
http://www.bayareafirst.org/about/partners.cfm
•
Greater Baltimore Alliance
http://www.greaterbaltimore.org/
•
Greater Houston Partnership
http://www.houston.org/
•
Greater Pheonix Economic Council
http://www.gpec.org/
•
Greater Richmond Partnership
http://www.grpva.com/index2.html
•
Growth Council of Oxford Hills
http://www.oxfordhills.org/
•
Pittsburgh Regional Alliance
http://www.pittsburghchamber.com/PRA.cfm
•
Research Triangle Regional Partnerhsip
http://www.researchtriangle.org/
•
San Diego Regional Economic Development Corp.
http://www.sandiegobusiness.org/welcome.html
•
SmartCities, Kansas City
http://www.smartkc.com/
•
Southern Indiana Economic Development Corp.
http://www.siedc.org/
•
Tampa Bay Partnership
http://www.tampabay.org
The National Council for Public-Private Partnerships
• http://www.ncppp.org/index.asp
The National Council for Public-Private Partnerships is a forum for the brightest ideas
and innovators in the partnership arena. Its growing list of public-and private-sector
members, with experience in a wide variety of public-private partnership arrangements,
29
and its diverse training and public education programs, represent vital core resources for
partnering nationwide.
The mission of The National Council for Public-Private Partnerships is to advocate and
facilitate the formation of public-private partnerships at the federal, state, and local
levels, where appropriate, and to raise the awareness of governments and businesses of
the means by which their cooperation can most effectively provide the public with quality
goods, services, and facilities.
E.
Economic Research Associates (ERA)
Public-Private Partnerships:
• http://www.econres.com/documents/ppp.html
Although ERA is a for-profit consulting firm, this website provides good case study
summaries of their PPP-related projects.
30
ENDNOTES
1
For interesting interpretations of the history of public and private joint activity in the U.S., see
Foster and Berger (1982, ch.1); Beauregard, in Pierre, ed. (1998, Ch. 4) and Sagalyn, in Miles. et
al., (1996, pp 288–89). For an excellent discussion of joint public and private efforts in the
provision of public goods and services, see Oakerson (1999).
2
We limited our review to the United States and Canada because their federalist systems of
government, entailing an overlapping hierarchy of political jurisdictions, combined with the
predominance of the private sector. This is not to say that PPP isn’t important in other countries,
but in most other countries the public sector plays a much greater primary role in overall
resource allocation. Hence PPP is viewed from a different perspective in most other countries,
and experiences may be less transferable or applicable to the United States and Canada.
3
For example, a PPP panel was one of the most attended in ULI’s recent (April 2002) “The
Washington Real Estate Trends Agenda” conference held in Washington, D.C. Moderated by
John B. Slidell, President, Bozzuto Homes, Inc., the panel included real estate experts Richard
Zeidman (coordinator), Linowes and Blocher, LLP; The Hon. Douglas Duncan, County
Executive, Montgomery County, MD; Bryant F. Foulger, Vice President, Foulger-Pratt
Companies; James W. Todd, President, The Peterson Companies, and Thomas S. Bozzuto,
President, & CEO Bozzuto Group.
4
A Google search for “public-private partnerships” resulted in 252,000 citations, while including
“economic development” yielded 23,800 sources. A Penn Internet Library search returned
hundreds of citations.
5
This report can also be used for basic graduate level courses in urban economics, public and
project finance, state and local government, and public policy, as well as courses in regional
economic development and policy.
6
For example, John Stainback, Public/Private Finance and Development: Methodology, Deal
Structuring & Developer Solicitation, uses several classifications to sort out the public/private
development process, both chronologically and by players’ roles.
7
“Economic Development” as used in this review refers only to state and local government
levels, not the federal level, unless specifically noted.
8
A detailed illustration of these categories is included in Appendix 5.1.
9
This also includes provision of public housing and the development of subsidized market
housing, where housing services, as opposed to investment, are paramount. For excellent
discussions and analyses of all of these types of PPPs, see Savas (2000)—or any of the many
contributions of Prof. Savas—and Oakerson (1999).
31
10
We do examine PPPs involved in public infrastructure investment if a significant component
of the PPP’s objective is to encourage or leverage private investment associated with the public
project. Public investment projects include: public buildings for government operations, prisons,
airports/port/transportation centers, transportation and utility infrastructure, low-income housing,
parks, recreation and library facilities, and convention centers.
11
Exclusion does not indicate that PPPs in these areas are not important, rather we are limiting
our review to certain economic development applications only.
12
Types of essentially private investment projects include: Commercial and industrial buildings,
Commercial retail, Large-scale retail/entertainment, Telecommunications infrastructure, Housing
development, and some Sports facilities/Convention-Assembly Centers. Sports facilities and
convention centers are not easily categorized, readily evident, or universally agreed-upon, and
we treat them as special cases.
13
In economic terms, due to either positive externalities (spillovers) or public good nature of the
project benefits.
14
Specifically excluded from this review are large-scale projects that are predominantly private
in nature, even if they include some type of public subsidy. At the opposite end of the spectrum,
we exclude projects that are essentially public in nature, such as roadway and bridge
construction. Although the distinctions along this private-to-public spectrum are blurring, there
are interesting and important examples near each pole.
15
This paper provides an excellent overview or work force development history and initiatives,
and analysis of PPPs in work force development, and is recommended to readers interested in
that particular area.
16
For an excellent overview of this evolution and delineation of specific economic development
“tools,” see Walzer and York (1998).
17
PPPs are commonly used approaches to state and local economic development whether in the
First, Second or Third “Wave” of economic development strategy as commonly defined today.
18
In addition to imperfect statistical methodology, this can be due to failing to identify particular
benefits, writing off benefits as insignificant, or merely data insufficiency problems.
19
These works are briefly summarized here, but also cited throughout the report.
20
ICSC, IEDC, Michigan Downtown Finance Association, and the Michigan Society of
Planning sponsor this program.
http://www.icsc.org/srch/mt/descs/2002S03/2002S03.pdf
32
21
We discuss “success” in more detail below.
22
This is an issue whether the impetus for the partnership comes from the public sector or the
private sector, referred to as “bottom-up” by Jacob and Walzer (1998).
23
While political scientists and political economists define governance in many ways, they tend
to focus on the institutions and process through which citizens’ demands for government services
are determined (sometimes referred to in the political economy literature as public choice) and
the manner in which these services are actually provided to the citizens. Because funding to pay
for the services ultimately comes from the pocketbooks of its citizens, the public sector and the
private sector are inextricably intertwined. For excellent discussions of these issues, see the
volume edited by Pierre (1998).
24
Guldbrandsen (2001) provides an insightful discussion of this important issue, along with the
results of a case study, in an unpublished paper presented at UNC-Chapel Hill. The paper,
available on the Internet, is referenced here only, and specifics are not cited, as he was unable to
be contacted for citation permission.
25
The primary basis for her discussion is based on an article by de Neufville and Barton (1987).
26
Summarized here; full listing and details can be found at http://www.nasda.org.
27
In a course syllabus, Kayden (2002) asks an important follow-up question: How can the tradeoffs between fiscal or financial benefits and other public interests be best understood by the
public?
28
An example from Loudon County: “Loudoun County Seeks Business Leaders for Economic
Development Commission. Loudoun County’s Economic Development Commission (EDC)
wants local business leaders who can contribute time, energy, and effort to promote a continued
thriving and sustainable economy in the county.” http://www.loudoun.gov/news/edc.htm
29
But they are by no means the only examples. Several more are noted in the Appendix.
30
Full details can be found at (http://www.ci.seattle.wa.us/ppp/default.htm).
31
Economists typically use two concepts in the framework of cost benefit analysis to measure
the success or effectiveness of programs or initiatives: Efficiency and Equity. We could find no
studies that seriously evaluated the effectiveness and performance of all types and forms of PPPs
used for economic development purposes. This is not surprising given the wide variety of PPP
approaches and the lack of consensus on single measures of success.
32
Rockefeller noted: “some of the major pitfalls of public-private partnerships involve language.
If we are not careful, the rhetoric surrounding the subject can far exceed the substance.”
(Rockefeller, 1986).
33
33
These are condensed and paraphrased. The complete details can be found at
http://www.ncppp.org/howpart/index.html.
34
Interestingly, his address was entitled “The Future of Public-Private Partnerships” and is
published in Davis, (1986).
34
REFERENCES
Beauregard, Robert. “Public-private partnerships as historical chameleons: The case of the
United States.” In Jon Pierre, ed. Partnerships in Urban Governance: European and American
Experience. New York: St. Martin’s Press, 1998, pp. 52–70.
Bomerstein, Phil. 2002. “Legislative Opportunities and Impediments- The Virginia Experience.”
Commonwealth Competition Council Presentation delivered to NCPPP Conference, Philadelphia
June 5, 2002.
Clarke, Susan E. 1998. “Economic Development Roles in American Cities: A Contextual
Analysis of Shifting Partnership Arrangements.” In Walzer and Jacobs, eds., Public-Private
Partnerships for Local Economic Development. Westport: Greenwood Publishing Group.
Davis, Perry, ed. 1986. Public-Private Partnerships: Improving Urban Life. New York:
Academy of Political Science, in conjunction with the New York City Partnership.
Dowall, David E. 1990. “The public real estate development process.” Journal of the American
Planning Association, 5(4): 504(9).
Erberts, Randall W., and George A. Erickcek. 2002. “ The Role of Partnerships in Economic
Development and Labor Markets in the United States.” W.E. Upjohn Institute for Employment
Research. Staff Working Paper 02-75. http://www.upjohninst.org/publications/wp/02-75.pdf
Fosler, R. Scott; and Renee A. Berger. 1982. Public-Private Partnerships in American Cities:
Seven Case Studies. Lexington, MA: Lexington Books.
Freilich, Robert. 1985. “Public Private Partnerships in Large-Scale Development Projects,” in
Barbara Weiss, ed. (1985). Public-private partnerships: Financing a common wealth.
Washington, DC: Government Finance Research Center, Government Finance Officers
Association.
Ghere, Richard K. 1996. “Aligning the ethics of public-private partnership: the issue of local
economic development.” Journal of Public Administration Research and Theory. 6(4): 599–622.
Ghere, Richard K. 2001. “Ethical Futures and Public-Private Partnerships: Peering Far Down the
Track.” Public Organization Review, 1(3): 303–19.
Grant, Robert, and Robert W. Hall. 1998. “Public-Private Partnerships Roles in Economic
Development.” Economic Development Commentary, Spring 1998.
http://www.iedconline.org/commentary_spring98.html#6
35
Greater Philadelphia First. 2002. “GPF Proposes Public-Private Partnership Strategy and
Financial Plan for Schuylkill Valley Metrorail: Formation of New Regional Public Authority
Recommended.” Press Release, Norristown, PA. (February 28, 2002)
http://www.gpfirst.com/022802.htm
Harrison, David. 1996. “10 public/private partnership commandments.” American City &
County, 111(13): 48(2).
Horowitz, Craig. 1997. “The Shining Pathmark.” New York, 30(33): 16(2).
Howard, Theresa. 1990. “Public, private partnerships target Newark renaissance.” Energy User
News, 15(9): 34.
Jamison, David 1982. “The Emerging Public-Private Partnership,” in Bearse, Peter, ed.,
Mobilizing Capital, New York: Elsevier
Jezierski, Louise. 1990. “Neighborhoods and public-private partnerships in Pittsburgh.” Urban
Affairs Quarterly. 26(2): 217–40.
Kayden, Jerold S. 2002. “Public and Private Development.” Harvard Graduate School of Design
Course Syllabus, GSD 5103 / KSG HUT-268, Spring 2002
Kennedy, Sheila S., and Mark S. Rosentraub. 2000. “Public-private partnerships, professional
sports teams, and the protection of the public’s interest.” American Review of Public
Administration, 30(4): 436–59.
Kotin, Allan, and Richard Peiser. 1997. “Public-private joint ventures for high volume retailers:
who benefits?” Urban Studies, 34(12): 1091(16).
Kosmont, Larry J. 2001. “In his own words…an insider’s look at the market.” Real Estate
SOUTHERN CALIFORNIA. February 2001.
Lichfield, Dalia. 1998. “Measuring the Success of Partnership Endeavors.” In Walzer and
Jacobs, ed., Public-Private Partnerships for Local Economic Development. Westport:
Greenwood Publishing Group.
Linder, Stephen. 1999. “Coming to terms with the public-private partnership: a grammar of
multiple meanings.” American Behavioral Scientist. 43(1): 35.
McDonough, Kate. 1998. Constructive Financing. American City & County, 113(6): 18(6).
Melnick, Scott. 1986. “Public-private ventures benefit both parties.” Building Design &
Construction, 27(May): 23(2).
36
Mitchell, Jerry. 2001. “Business Improvement Districts and the ‘New’ Revitalization of
Downtown.” Economic Development Quarterly, 15(2): 115–23.
Morlok, William. 1993. “Weaving the Public/Private Venture.” American City & County,
108(2): 18.
NCPPP. 2002. “For the Good of the People: Using Public-Private Partnerships to Meet
America’s Essential Needs.” White Paper on Partnerships. Washington, D.C.
Oakerson, Ronald. 1999. Governing Local Public Economies, Oakland: ICS Press.
O’Looney, John. 1992. “Public-private partnerships in economic development: Negotiating the
trade-off between flexibility and accountability.” Economic Development Review, 10(4): 14–23.
Osborne, David, and Ted Gaebler. 1992. Reinventing Government. Reading, MA: AddisonWesley.
Peters, B. Guy. “With a little help from our friends’: public-private partnerships as institutions
and instruments.” In, Jon Pierre, ed. Partnerships in Urban Governance: European and
American Experience. New York: St. Martin’s Press, 1998, pp. 11–33.
Pierre, Jon, ed. 1998. Partnerships in Urban Governance: European and American Experience.
New York: St. Martin’s Press.
Rheume, Cynthia. 2000. “The Case for a Public/Private Partnership.” The Public Manager,
29(2): 49.
Russell, David. 1990. “Motown Makeover.” American Demographics, 12(8): 54(2).
Sagalyn, Lynne B. 1996. “Meshing Public and Private Roles in the Development Process,” in
Mike E. Miles, et al. ed., Real Estate Development, Washington, D.C.: ULI
Sagalyn, Lynne B. 1997. “Negotiating for public benefits: The bargaining calculus of publicprivate development.” Urban Studies, 34(12): 1955–70.
Stainback, John. 1996. “Public/Private Partnerships: The Whole is Greater Than the Sum of the
Parts.” E & Y Kenneth Leventhal., Real Estate Group Ernst & Young LLP: The Digest of
Public/Private Partnerships.
Stainback, John. 2000. “Public/Private Finance and Development: Methodology Deal
Structuring Developer Solicitation.” John Wiley & Sons, Inc.
Stein, Charles L. 2000. “The Role of the Private Sector in Economic Development: Strategic
Development Services.” Economic Development Review, Vol. 17, Issue 1: 25-7.
37
Stephenson, Max O. 1991. “Whither the Public-Private partnership: a critical overview.” Urban
Affairs Quarterly, 27(1): 109–19.
Stoker, Gerry. 1998. “Public-private partnerships and urban governance.” In, Jon Pierre, ed.
Partnerships in Urban Governance: European and American Experience. New York: St.
Martin’s Press, 1998, pp. 34–51.
Temple, Steve. 1996. “Spreading Up-Front Costs Spurs Development.” American City &
County, 111(11): 54(2).
Walzer, Norman D., and Brian Jacobs, eds. 1998. Public-Private Partnerships for Local
Economic Development. Westport: Greenwood Publishing Group.
Walzer, Norman, and Lori York. 1998. “Public-Private Partnerships in U.S. Cities.” In Walzer
and Jacobs, ed., Public-Private Partnerships for Local Economic Development. Westport:
Greenwood Publishing Group.
Wasserstrom, David R. 2000. “How public-private partnerships saved Cleveland—and can save
it again.” Inside Business, 2(9): 47–50.
Weiss, Barbara, ed. 1985. Public-private partnerships: financing a common wealth. Washington,
DC: Government Finance Research Center, Government Finance Officers Association.
Woodward, Craig. 1994. “Partnership: more than a buzzword.” Economic Development Review.
12(1): 66–69.
Wright, Gordon. 1987. “Dual ownership reaps benefits for both parties.” Building Design &
Construction, 28(April): 21(2).
38